I am not sure that there is a better business than real estate but I am also not sure if there is a tougher one in today’s market. Home values countrywide are incredibly low and continuing to drop in places. Those in really bad shape now are the ones that bought five or so years ago when homes were way overpriced. Those in really, really bad shape are those who also got into a mortgage that seemed like a good idea at the time but made little sense in the long-term.
I live in California, where the prices of homes five years ago was way above the assessed value and people routinely had buyers with fat checkbooks knocking down their door to get into homes. Unfortunately, I had just moved to Los Angeles, and I needed a place to live. Going with the conventional wisdom of buying is better than renting, I bought property.
This mindset put my wife and I into a condo that we could not nearly afford. When we applied for the mortgage we were sure we would be denied but when they said yes, we just figured they were smarter than us. Well, the mortgage was an interest only and so we were not building equity. When my wife got pregnant again, she decided to leave her job and full-time salary with it. We were setting and had set ourselves up for trouble. As things got worse and bills piled up, we found ourselves on decrepit furniture with home space heaters to warm us.
As everyone knew it would, the housing market took a dive and prices dropped along with the economy’s deflation. Our condo was worth much less than what we paid, although our mortgage was still the same amount. We couldn’t survive in our current situation and we couldn’t make money selling our house if anyone even agreed to buy it. So, after filing bankruptcy we attempted a short sale.
Today we rent and are on the path to recovery. We did learn many lessons and had I to do it all again, I would do it very different.
If I could do it again, I would get into an income property so that I could have a tenant cover the mortgage. I would get into a home that needed some work and touch it up with some home decor accents and maybe a touch of paint on the walls. Certainly, I would buy something not only in my price range but below it. And I would definitely get a mortgage that built equity and whose terms were logical and sensible.
The last thing I would want is the worry of a mortgage month to month that I couldn’t cover. The only thing I would want is a home with real value that anyone could see and I would be able to hang onto it long enough to make it a really great resale property, whatever the economy threw our way.
